Need Help - Capital Gains and Tax

momack320

Can anyone help think I have got myself into a right mess. Bought a small flat 11 years ago as my main residence and lived in it for 5 years then met my husband (who stayed in a different area) and rented with him for 2 years, and rented out my flat. Then we bought a property together so in total I have been renting out my flat for 7 years and not declared it to the taxman as at the time my financial adviser said I wasn't making enough profit on flat to pay tax - how naive was I ? Also the bank were quite happy and just kept the same mortgage it was never changed to a buy to let?

Now the question - I am now selling and will probably make about 30k am I going to get caught for all the backdated tax as well as CGT and do I need to see and accountant as well as solicitor when selling?

Any help very Much appreciated.

Thanks

Cara79

Hi there

I'm sure someone will come along soon who can help, but I'm sure as you have lived in the property for 5 years as your main residence that you wont have to pay CGT.

Hope I am right.

Not sure about the tax man etc.

x

umami

Hello try this 2 bbc websites because I remember they either have previous programmes on cgt or tax in general, https://www.bbc.co.uk/workinglunch and https://www.bbc.co.uk/moneybox. I am sure there is something in their archives.good luck

Property_Magnate

You have been commiting tax fraud which you could go to prison for. Own up before you get caught.

Your Capital Gains Tax bill will be reduced as it used to be your PPR (Principle Private Residence.)

Spend some money and see an accountant. You can offset the cost against your future tax bill anyway.

silvercar

It could very well be that you have not been making enough profit on the rental income, after allowing for your mortgage interest, to pay tax.

If this is so, then your only worry is capital gains tax which, as you haven't actually sold and realised the gain, you have not yet got. So there is no major worry as yet.

You will be entitled to relief for the time it was your main residence and for the last 3 years as you have lived in the property at some point. You will also be entitled to tapering relief as you've owned it for a good few years. You also get a capital gains tax allowance of £8,800 in the current year.

Please don't worry too much, the revenue put people in jail who have deliberately defrauded them, not people who admit they are in a mess and want to sort it out. Ring the revenue and ask them for their advice leaflet on owning property.

umami

hi it's me again.The moneybox programme is having a phone in today on radio4 at 3pm on tax.Either phone in or send them an e-mail and you might be able to know more as the tax expert will be on.

momack320

Thank you all for your help

Think I will book an appointment with an accountant!!

Ian_W

Good idea!! If you do though I think the accountant must tell you to admit all to the revenue otherwise they could be in trouble.

If you've got records showing you didn't make a profit the penalties, if you bring it to their attention when there was little prospect of them detecting it, are likely to be minimal but they will require some proof you were making a loss or very small profit.

As regards CGT I don't think you'll have much, if any, to pay. Silvercar in post#5 is correct except didn't mention that when you claim residential relief, ie it's been your principal residence at some point, you can also claim the same amount [up to £40K] in letting relief. There's an HMRC helpsheet which explains it at https://www.hmrc.gov.uk/pdfs/2003_04/capital_gains/ir283.pdf. You do, however, need to declare the capital gain even if it's a negative gain after all reliefs and allowances have been applied. You have until the end of January after the end of the tax year to do it - so thats Jan 2008 if you sell now.

Getting it sorted is best really, oh and BTW sack your previous "financial advisor" - you should report any untaxed income/earnings because even losses can be set against future profits and sometimes [not for BTL property rental] against other taxed income.

BoL.